Zevallos v. Obama

• Citation: 793 F.3d 106
• Decision Date: 10 July 2015
• Docket Number: No. 14–5059.,14–5059.
• Parties: Fernando ZEVALLOS, Appellant v. Barack Hussein OBAMA, in his official capacity as President of the United States, et al., Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

793 F.3d 106

Fernando ZEVALLOS, Appellant

v.Barack Hussein OBAMA, in his official capacity as President of the United States, et al., Appellees.

No. 14–5059.

United States Court of Appeals, District of Columbia Circuit.

Argued March 17, 2015.

Decided July 10, 2015.

Erich C. Ferrari argued the cause and filed the briefs for appellant.

Benjamin M. Shultz, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief were Ronald C. Machen Jr., U.S. Attorney, and Mark B. Stern, Attorney.

Before: GRIFFITH and KAVANAUGH, Circuit Judges, and SENTELLE, Senior Circuit Judge.

Opinion

Opinion for the court filed by Circuit Judge GRIFFITH.

GRIFFITH, Circuit Judge:

Appellant Fernando Zevallos brought suit challenging the determination of the Department of the Treasury that the President had lawfully designated him a significant foreign narcotics trafficker. The district court rejected his claims, as do we.

I

This case arises under the Foreign Narcotics Kingpin Designation Act (Kingpin Act), 21 U.S.C. § 1901 et seq., one of several statutory mechanisms that enable the President to block or seize the assets of individuals or entities involved in international crime or terrorism. The Kingpin Act was modeled on a specific, successful application of a similar statute, the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. §§ 1701 –07. See H.R.Rep. No. 106–457, 42 (1999). IEEPA itself is closely analogous to the antiterrorism provisions of the Antiterrorism and Effective Death Penalty Act of 1996, 8 U.S.C. § 1189 (AEDPA). Under all three statutes, the President can designate individuals or entities as posing a threat to the security of the United States or its interests and impose sanctions on them.

The Kingpin Act specifically targets persons that “play[ ] a significant role in international narcotics trafficking,” 21 U.S.C. § 1907(7), as “significant foreign narcotics traffickers,” id. § 1903(b). Narcotics trafficking includes producing, distributing, selling, financing, or transporting any illegal narcotic, or conspiring with or assisting others to do so. Id. § 1907(3). Persons designated as significant foreign narcotics traffickers under the Kingpin Act—just like persons designated a threat to the United States under IEEPA and AEDPA—are added to the “Specially Designated Nationals and Blocked Persons List,” 31 C.F.R. § 501.807(a), and all their assets in the United States or under the control of any person who is in the United States are “block[ed],” 21 U.S.C. § 1904(b), or effectively frozen. No citizen or resident of the United States may transact or deal in blocked property. Id. § 1904(c).

A designated person may “seek administrative reconsideration” of his designation and request to be removed, or “delist[ed],” from the Specially Designated Nationals and Blocked Persons List. 31 C.F.R. § 501.807. The same procedure applies irrespective of which statute was invoked to designate the person in question. 31 C.F.R. Ch. V, App. A; id. § 501.807. A request for reconsideration—also sometimes called a delisting request—may include arguments or evidence rebutting Treasury's “basis ... for the designation,” or “assert that the circumstances resulting in the designation no longer apply.” Id. § 501.807, 807(a). In other words, the designated person must argue that whatever rationale led Treasury to designate him under the appropriate statute—as relevant here, that the designated person was a significant foreign narcotics trafficker as defined in the Kingpin Act—was never true or is no longer true. The Office of Foreign Assets Control at the Department of the Treasury will “conduct[ ] a review of the request for reconsideration” and “provide a written decision to the blocked person.” Id. § 501.807(d). A designated person can request delisting as many times as he likes. See id. § 501.807.

Petitioner Fernando Zevallos is a Peruvian national who founded and led Aero Continente, a low-cost airline operating throughout Latin America. A number of countries, including the United States, investigated Zevallos for alleged involvement in narcotics trafficking throughout the 1980s and 1990s. Peru's investigations culminated in a 1997 indictment of Zevallos on drug trafficking and money laundering charges based on allegations that he had worked with drug traffickers to launder some $40 million.

In June 2004, President George W. Bush used his authority under the Kingpin Act to designate Zevallos as a significant foreign narcotics trafficker. Accordingly, all of Zevallos's assets in the United States and the assets of related companies and individuals were blocked. Around the time he was designated, Zevallos attempted to illegally transfer property he owned in Miami to his wife. He was eventually charged in the Southern District of Florida with violating the Kingpin Act by attempting this transfer. Those charges are still pending.

In December 2004, Zevallos asked Treasury to remove him from the Specially Designated Nationals and Blocked Persons List and unblock his assets. He submitted to Treasury a memorandum with exhibits in support of his request (the 2004 Memorandum). Treasury responded in June and September 2005 by disclosing non-sensitive material relating to Zevallos's designation. Zevallos filed a supplemental submission reiterating his arguments one month later.

Zevallos brought suit in November 2005 in federal district court in the District of Columbia, seeking an order that would require Treasury to take his name off the Specially Designated Nationals and Blocked Persons List and unblock his assets. However, shortly thereafter, Zevallos was convicted on all pending charges in Peru. He voluntarily dismissed his pending lawsuit against Treasury two days after his conviction, terminating that litigation. Treasury has since explained to Zevallos and to us that the agency interpreted Zevallos's dismissal of his lawsuit as a sign that he was abandoning his request for delisting, though Treasury did not tell this to Zevallos at the time. At some point thereafter, Treasury lost the exhibits Zevallos had submitted with the 2004 Memorandum. Those exhibits have never been found.

Zevallos began serving a twenty-year prison sentence in Peru in 2005. He remains in prison in Peru today. Four years passed with no communication between Zevallos and Treasury. Zevallos broke this silence in July 2009 when he wrote to various U.S. officials, requesting extradition from Peru so that he could face the charges pending against him in the Southern District of Florida. Treasury construed this letter as a request for the agency to reexamine Zevallos's designation and wrote back, asking Zevallos to answer a questionnaire about his financial interests and relationship with a variety of entities and individuals. Zevallos filed a response to that questionnaire in November 2009.

Another four years passed with no action from Treasury on Zevallos's resuscitated delisting request. In March 2013, Zevallos filed this action, seeking an injunction that would force Treasury to act on his long-pending delisting request. Three months later Treasury at last denied the request. Treasury acknowledged losing the exhibits attached to Zevallos's 2004 request, but tried to make up for this mistake by assuming that whatever Zevallos said about this evidence in his 2004 Memorandum was true. Even so, Treasury concluded that Zevallos was properly designated in 2004 and that he should remain designated in 2013. Treasury also produced a number of new pieces of evidence in support of the designation.

In response, Zevallos amended his complaint in this action to introduce new claims attacking Treasury's decision. Relevant to this appeal, Zevallos argued to the district court that the denial of his delisting request was arbitrary and capricious and that Treasury had disregarded agency procedures. He also maintained that Treasury's decision should be reviewed de novo. Separately, Zevallos argued that his designation violated his procedural and substantive due process rights under the Due Process Clause.

Treasury insisted that the district court should use the APA's conventional arbitrary and capricious standard, not de novo review. Treasury also asked the district court to dismiss or grant summary judgment as to every count of Zevallos's amended complaint. The district court held in Treasury's favor on each point.

See Zevallos v. Obama, 10 F.Supp.3d 111, 119–33 (D.D.C.2014).¹

Zevallos timely appealed. We have jurisdiction under 28 U.S.C. § 1291. We consider the district court's ruling de novo. Islamic Am. Relief Agency v. Gonzales, 477 F.3d 728, 732 (D.C.Cir.2007). As always, when we examine an agency's decision, we apply the APA's “highly deferential standard,” meaning that we may set aside Treasury's action “only if it is ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’ ” Id. at 732 (quoting 5 U.S.C. § 706(2)(A) ); see also Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156, 161 (D.C.Cir.2003). Under that standard, “we may not substitute our judgment for [Treasury's], but we will require it to ‘examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.’ ” Islamic Am. Relief Agency, 477 F.3d at 732 (quoting Motor Vehicle Mfrs. Ass'n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) ).

Zevallos asks us to take the extraordinary and rare step of reviewing Treasury's determination de novo instead of under the APA's arbitrary and capricious standard. See Melissa F. Wasserman, Deference Asymmetries: Distortions in the Evolution of Regulatory Law, 93 Tex. L.Rev. 625, 639 n.44 (2015) (finding only one example where a court applied de novo review under the APA, in an unusual case in which the agency decisionmaker had obvious bias against the petitioner). We will not do...